Private equity firm Bain Capital is looking to invest a large sum in listed private-sector lender Axis Bank, a person privy to the development told VCCircle.
The PE firm is likely to invest at least $550 million (around Rs 3,562.6 crore) in Axis Bank, weeks after the lender reported a rise in its non-performing assets, the person said, asking not to be named.
Bain Capital perceives that Axis Bank’s stock is slightly stressed and hence less expensive to acquire while Axis Bank could potentially use the funds to meet capital requirements, the person said.
In its latest earnings report, Axis Bank said its NPAs rose to Rs 27,402 crore in the July-September quarter from Rs 22,031 crore in the April-June quarter this year.
The Times of India and The Economic Times reported that JP Morgan is helping Axis Bank raise close to $1 billion from Bain Capital.
As per the Reserve Bank of India’s norms, investors are allowed to pick up a stake of only 5% in private-sector lenders—they need to secure the apex bank’s approval to acquire stakes greater than 5%.
At the current valuation, a 5% stake in Axis Bank is worth around $950 million (Rs 6,154 crore). Bain Capital could bring some co-investors such as Singapore sovereign wealth fund GIC. Previously, it has done deals worth $500 million to $1 billion with GIC for picking up sizable stakes in Genpact and Hero MotoCorp. GIC is already an investor in Axis Bank as is Singapore state investment firm Temasek.
Bain Capital and Axis Bank declined to comment.
Axis Bank scrip rose over 6% on Tuesday and was trading at Rs 504 per share at noon.
Global investors have been seeking to acquire stakes in Indian lenders despite the banking sector’s perceived stress.
For instance, Catholic Syrian Bank has attracted interest in the past from SSG Capital Management and Fairfax Holdings.
Canadian investors CPPIB and CDPQ have made large-sized bets on Kotak Mahindra Bank.